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Keys to History

Upon returning to office in Ottawa in October 1935, the Liberals were confronted with a disagreeable fact. The four western provinces needed federal loans so that they could meet their financial obligations.

Unwilling to continue subsidizing the provinces, Ottawa tried but failed to establish a loan council that would supervise provincial borrowing. In April 1936, Alberta defaulted on an interest payment. Fearing that further defaults would hurt the Dominion's credit, Ottawa resumed its lending.

Against this background, in August 1937, the federal government created the Royal Commission on Dominion-Provincial Relations. Its chair was Ontario Chief Justice N.W. Rowell (1867-1941), who was replaced late in 1938 by Professor Joseph Sirois (1881-1941). The commissioners were asked to state what, in their view, would effect "a balanced relationship between the financial powers and the obligations and functions of each governing body, and conduce to a more efficient, independent and economical discharge of governmental responsibilities in Canada." (Royal Commission on Dominion-Provincial Relations)

What

A key recommendation of the Commission was that every province ought to have the resources to provide services at the average national level without levying taxes beyond the average national level.